After two weeks of meetings at COP27, global leaders have reaffirmed previous calls to limit global temperature rises to 1.5° Celsius above pre-industrial levels. Similar to prior COPs, much of the focus was on ramping up government spending on renewable energy. While emissions reductions and more resilient communities are laudable goals, the strategies to accomplish these goals follow the same top-down, government-centric thinking of past UN climate conferences. Instead, global leaders should unleash policies rooted in economic freedom to see meaningful economic and climate progress.
Past UN climate commitments have been multilateral agreements driven by big government actions. Due to their non-binding nature, these agreements have stumbled into a collective action problem. As a result, many nations have failed to reach emissions targets or fulfill their international climate financing commitments. In 2020, rich countries gave $29 billion to the developing world to address climate risk, short of the $340 billion the UN believes will be needed annually through 2030 to curb global temperature rises. Additionally, no countries are on track to accomplish their emissions targets under the Paris Agreement, according to independent analysis firm Climate Action Tracker.
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Importantly, the UN’s funding process through its primary vehicle, the Green Climate Fund, is onerous and hard to navigate which often hurts the developing world. In the Philippines for instance, it can take as long as four years for a city to receive funding for flood defenses. As local officials have stated, “by then the city applying for a flood facility would already have sunk under the flood it wanted to solve.”
The current funding mechanisms are not the most effective ways to reduce climate risk in vulnerable communities, unleashing economic freedom is.
One of the most important steps that policymakers can take to increase economic freedom is allowing markets, not bureaucrats, to pick energy winners and losers. International climate conferences focus almost exclusively on the potential for renewable energy in reaching emissions targets but negate the critical role that fossil fuels and nuclear power play in keeping the lights on, keeping the heat running in the winter, and helping to reduce global greenhouse gas emissions.
This not only deters investors but hurts the developing world as well. As African Development Bank President Akinwumi Adesina argued during COP27, “Africa has the highest level of energy poverty in the world…My interest is how Africa uses natural gas as part of its energy mix to provide electricity for 600 million people today that don’t have access to electricity.”
Access to reliable power is one of the most effective ways to help communities rise up the economic ladder. This is especially important given the UN’s focus to increase adaptation and resiliency in the developing world. As countries become more prosperous, they are able to adapt to a changing climate more easily by investing in critical infrastructure to reduce disaster-related fatalities.
Domestic oil and gas production can be an effective economic and climate strategy by bringing affordable energy to consumers with a lower emissions profile. American natural gas, for instance, is 40% cleaner than Russian gas, while American oil has a carbon footprint half that of Venezuelan crude. If Europe were to switch from Russian gas to American LNG, it would be able to reduce emissions by 72 million metric tons annually, the equivalent of removing more than 15.5 million cars from the road.
Global leaders must also recognize the incredible strides that the private sector has taken to advance climate solutions and limit global temperature increases. In 2021, private sector funding for the energy transition reached a record $980 billion. Innovative companies are also exporting their technologies around the world. In March, Raleigh-based 8 Rivers capital received $100 million from SK Innovations to deploy its clean technology solutions in emerging Asian markets. American advanced nuclear company NuScale has signed contracts to deliver its reactors to several European countries, and ExxonMobil has recently announced that it will bring carbon capture to Indonesia.
These private sector-led pushes solve the proverbial “teach a man to fish” conundrum by bringing lasting jobs and prosperity to developing nations, allowing countries to climb the economic ladder. As countries become more economically free, they are able to deploy more innovative technologies, build resilient infrastructure, and increase the quality of life for their citizens. In fact, countries that are economically free are twice as clean as those that are not.
As world leaders look to address climate change and limit global temperature increases post-COP27, they should look for new ways to deploy cleaner energy and technologies faster. Multilateral funding agreements have been largely ineffective as the primary vehicle to reduce climate risk. To see meaningful progress, the world needs to unleash economic freedom.